Toward a Better Future

What a stunning 12 months it has been, with the last 2 months particularly unnerving. Temptation toward panic is one response. Or temptation toward a better future is another. More specifically, we cannot quickly undo the economic mess or magically make asset values return to pre-September 2008 levels. But we can make important steps that produce sustained progress. Let's look at the US. As Tom McCabe, a friend of mine and highly respected business leader here in Asia said recently, Asian economies have invested over $2 trillion in infrastructure development since the start of this decade that have raised living standards and produced millions of high value jobs, while the US invested in financial trading services that did little or nothing to support the capital investment and growth needs of companies. We now know the outcome of these divergent investment strategies. Interestingly, President Obama has presented a budget to Congress that invests heavily in infrastructure, healthcare, energy and education--long overdue sectors of the US economy. Predictably, Washington DC is gearing for a fight as many conservatives are apoplectic at the size of the government spending proposals and the deficits. I am concerned that pork barrel spending is still a problem in the current budget. But endless debate and ideological paralysis will not be productive. We have learned that the past decade of unreported Iraq spending, coupled with inconsistent domestic investment, tax cuts, poor regulatory oversight, and a generally directionless set of economic priorities have produced the present meltdown that is affecting markets everywhere. Paul Krugman, the Nobel Prize winning economist has been a vocal proponent of even larger fiscal stimulus than that proposed by Obama, because the US faces a $2-3 trillion GDP gap. While the news currently is bad and likely to get worse, the US appears to be planting the seeds for a far stronger economic future, albeit one that is a decade away from hitting on all cylinders. In the meantime, we should avoid panic and look toward a better future.